Germany’s two-year bond yield hits record low on scarcity fears

Germany’s two-year government bond yield hit a fresh record low on Wednesday on expectations that the European Central Bank will extend its asset purchase programme beyond March 2017 and exacerbate a scarcity of tradable debt in the market. The two-year German government bond fell as low as minus 0.74 percent at 0715 GMT, having dipped below minus 0.70 percent for the first time in months on Tuesday. ING strategists attributed the move to “increasing collateral scarcity”. Short-dated German government bonds are often posted as collateral for short-term borrowing in money markets. German bond yields have been falling this week after European Central Bank policymakers helped curb a recent sell-off in the bloc’s debt by reaffirming their commitment to easy monetary policy.